Correlation Between Pace High and Columbia Seligman

Can any of the company-specific risk be diversified away by investing in both Pace High and Columbia Seligman at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Pace High and Columbia Seligman into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pace High Yield and Columbia Seligman Global, you can compare the effects of market volatilities on Pace High and Columbia Seligman and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Pace High with a short position of Columbia Seligman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace High and Columbia Seligman.

Diversification Opportunities for Pace High and Columbia Seligman

0.4

Correlation Coefficient

Pace High  Columbia Seligman

Very weak diversification

The 3 months correlation between Pace and Columbia is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pace High Yield and Columbia Seligman Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Seligman Global and Pace High is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Pace High Yield are associated (or correlated) with Columbia Seligman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Seligman Global has no effect on the direction of Pace High i.e., Pace High and Columbia Seligman go up and down completely randomly.

Pair Corralation between Pace High and Columbia Seligman

Assuming the 90 days horizon Pace High is expected to generate 2.27 times less return on investment than Columbia Seligman. But when comparing it to its historical volatility, Pace High Yield is 6.23 times less risky than Columbia Seligman. It trades about 0.18 of its potential returns per unit of risk. Columbia Seligman Global is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,959  in Columbia Seligman Global on September 20, 2024 and sell it today you would earn a total of  2,632  from holding Columbia Seligman Global or generate 53.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Pace High Yield  vs.  Columbia Seligman Global

Pace High Yield

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pace High Yield are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Seligman Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Seligman Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Seligman is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pace High and Columbia Seligman

The main advantage of trading using opposite Pace High and Columbia Seligman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace High position performs unexpectedly, Columbia Seligman can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Columbia Seligman will offset losses from the drop in Columbia Seligman's long position.

The idea behind Pace High Yield and Columbia Seligman Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.